Tuesday, February 24, 2009

SBA Franchise Loan Default Rates for 2008

Defaults on SBA 7a loans for franchises have soared by 52% in the latest fiscal year according to The Wall Street Journal (subscription required). In dollar terms, the loan losses totaled $93.3 million, a 167% increase over the prior year.

As a percentage of the total number of SBA 7a loans, these franchisees were not the worst offenders. The worst offenders based upon percentage of SBA guaranteed loans to franchisees to default over the last eight fiscal years included: Mr. Goodcents Subs & Pastas (55%), Philly Connection Sandwiches (51%), Cottman Transmission (49%), All Tune & Lube (47%), Cornwell Quality Tools (42%), Carvel (41%) and Blimpie (41%).

I'm sure someone at these franchisors has a really good reason why their franchisees may not be good at repaying their debts. The bottom line is that SBA lenders will be thinking twice before taking one of these deals to their investment committees.

Need help finding the right lender or telling your story the right way for your California business? Read "Matchmaking for Business Loans" and give me a call!

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About Me

Marshall Lebovits has over 25 years of experience in the secured financing industry. Marshall advises on a wide variety of asset based funding solutions for businesses throughout the USA. If your business has receivables, inventory or equipment and needs over $50 thousand of financing, please contact me at 310-344-2522.